Fixed vs Variable Mortgage Rates for Buying a New House

Before buying and moving into a new home there is one big decision to make and that is whether to choose a fixed or a variable mortgage rate. This decision will determine what interest rate you are going to pay on a monthly basis for your mortgage for the next twenty years or so, so choosing the right rate is definitely one of the most important things to do. However, there isn’t one correct way to go about this, as there are many factors you need to take into consideration before you make that initial decision, but here are some facts to help you out.

Fixed and Variable Mortgage Rates

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is one where there is a set interest rate that cannot change in the duration of the mortgage (if you don’t refinance). The fixed mortgage rate guarantees you a determined interest that you have to pay each month.

The advantage of a fixed-rate mortgage is that the homeowner will not have to contend with varied loan payment sum of money that changes with the interest rates.

What is a Varied-Rate Mortgage?

A varied-rate mortgage or adjustable-rate mortgage (ARM) is one where typically the interest rate is not fixed and can vary from month to month, potentially going either higher or lower over longer periods of time.

The biggest advantage of variable rate mortgage is that the interest rate modifies periodically. Monthly principal and interest payments vary according to a preset agenda throughout the life of the loan.

Most creditors and private firms need a down payment of about 5 to 20 percent of the entire sum of money from a borrower. This is more than the government mortgage loans with lower down payments. Your down payment also affects your loan-to-value ratio, or the amount of stake you have in your home compared to your mortgage. If you put down a larger down payment, you’ll start off with more equity in your home.

Factors to Keep in mind before Applying for a Mortgage Loan

While taking a fixed or varied rate mortgage loan for purchasing a brand-new house, it is important to keep in mind your monthly income, interest rate of the loan and actual price of your house.

You need stable and reliable sources of monthly income before applying for a mortgage loan.

The interest rate of the loan is an important factor to consider as it will decide how much money you will have to pay every month. While the whole act of loan processing will continue with paperwork and reviewing, the rate of interest will vary.

The price of a house impacts your mortgage. For example, if you want to purchase an expensive house you will have to make a larger sum of money as down payment or convince the seller to make some reduction in the price. Similarly, if the house costs lesser, the amount of money as down payment will be less.

It’s Personal

While you may be able to find great real estate deals online, make sure you don’t get carried away and rush into anything when applying for a mortgage. Only you know your financial situation which is the main thing to bear in mind when deciding to go with fixed or variable mortgage rate. Variable-rate mortgages can be risky for those who don’t have a high or constant income. If your financial situation fluctuates throughout the year, fixed rate may be the better option for you. If you are willing to take the risk, and believe that in the future the rates will go down, choosing the variable interest rate is the way to go. Especially nowadays, with all that economic turmoil going on choosing the variable interest rate can possibly save you some money.

Take Your Time

Last but not least, take your time. Do your research and homework and find out as much as possible about your possible lenders and what interest rates they offer. Use the internet as a source of information. Read about other people’s experiences, and ask yourself these questions: What monthly mortgage payment could you afford at the moment? If interest rates rise would you still be able to afford those payments? How long are you planning on living in the property? Either way you go, make sure you understand the consequences of your choices.

Keep in mind that making the decision to go with fixed or variable interest rate doesn’t have to be the last decision you’ll ever make, as you can always refinance your mortgage. Whatever you do, make sure you evaluate your personal situation as well as what’s going on in the market at the moment, taking into consideration all these factors will help you to make the right decision.

5 Essential Tips For Securing a Mortgage

Getting a mortgage need not be a painful endeavour. While the idea of saving in earnest can be something of a burden, there are some failsafe tips that you can use. For many, the thought of homeownership seems like an unaffordable and unobtainable dream. But, it doesn’t need to be that way. In fact, you can be on the route to owning your own property by using these five essential tips.

  1.    Check Your Credit Rating

Your credit rating could be the thing that is holding you back. You need to make sure that you have a clean bill of financial health before you choose to go for a mortgage. With a vast array of online tools to help you, you can check what your credit score is before going to the bank. This is important. You need to make sure that you have an excellent credit score. If your score is less than anticipated, now is the time to start making positive and proactive steps into fixing it. The simplest way to do this is to make sure that you are paying your bills on time.

  1.    Look into Government Schemes

Government Help to buy plans is ensuring that everyone can get on the property ladder. With only a 5% deposit required for many of these mortgages, a 5 bedroom 3 bath home in Rickmansworth doesn’t have to be a dream. It can be a reality. Government schemes are in place to help those on low incomes get on the first rung of the property ladder. Speak to your mortgage advisor to see what can be done for you. Alternatively, look at the Gov.uk site for more information.

  1.    Have a Budget in Mind

Budgeting when you are looking into securing a mortgage may seem like an oxymoron. But, if you are keen on buying property make sure that you have a budget in mind. Aiming for the lower end of the market will ensure that you have ‘play money’ at the end of the month. You don’t want all of your spare cash tied up in property. Make sure that you factor in living expenses and stick to your budget.

  1.    Be Flexible When it Comes to Location

While you may dream of living in central London, where all the hip and happening people are, this is going to cost you a fortune. By being flexible on location, you can grab a fantastic property at an exceptional price. What is more, you are more likely to secure a mortgage on a property that is cheaper. You don’t have to go to the other end of the country to find a great deal. Even the neighbouring postcode to your preferred location could save you a small fortune in the long term.

  1.    Independent Mortgage Advice

Many people seek the advice of banks. But, there is no substitute for independent mortgage advice. By doing this, you will not be tied to one provider. What is more, independent mortgage advisors don’t have vested interests in your cash. Explore all avenues for a brilliant deal on your mortgage.

Find The Best Mortgage Advice

You must be equipped with a lot of information about available mortgage products to make up your mind as to what will suit your purpose and pocket. Need advice? Where to locate a good advisor? And how much do you have to pay for getting advice on a mortgage product?  This article throws focus on how you will find the best mortgage advice when so many financial advisors are all around to extend their help.
How to Start?
With too many offers available at a time, making a choice will be tough. What will you do? Will you walk along the highway and drop in every financial house to seek their advice? Though it is less likely that you will do so, still even if you do so, there is a little chance of getting unbiased advice. They are doing business and so will want you as a marginal addition to the list of their clients. Even if they claim to have a separate advisory body which works independently, an unbiased approach is least expected. A few of us are aware of the fact that all mortgage products are not be presented to the prospective borrowers as some reserved choices are only made available through the agents’ network.
Internet surfing is the best course of action to learn the rates and quotes as offered by different companies. Most of the companies have opted for online advertising by providing details about their products on the World Wide Web. Browse through their website to get the best rate and conditions pertaining to a particular product. Conditions are important but may not appear in publicly advertised material of the lender. However, you have to pay a fee for placing your business. Generally, normal service fee is within 1% of the total amount borrowed but may differ depending on how much effort has been put in.
Hiring an advisor for searching on your behalf and making necessary comparison between the available offers won’t be a bad idea, especially when you can afford to pay for the service. The mortgage advisors can be divided under two heads – Independent Mortgage Advisor and Independent Financial Advisor.
Independent Mortgage Advisor
Till date, the independent mortgage advisors are not guided by any statutory regulation. However, majority of them subscribe to Mortgage Code. It puts them under obligation to conform to certain procedures in regards to conduct and advice. Many lenders prefer introduced business from the advisors who are registered on the Mortgage Code Register of Intermediaries. For registration, an adviser must own a current credit license issued by the Office of Fair Trading. All these set a standard guideline for both the mortgage lenders and intermediaries as well as protect the borrowers’ interest too.
Independent Financial Adviser
These advisors are regulated by the Financial Services Act, 1986 and Conduct Rules of 1987. They have the legal authority to offer advice on the regulated products and sell the same. These regulated products include investments, pensions, endowments, mortgages etc. These advisors must be registered on the Mortgage Code.

5 Tips to Get Best Mortgage Broker Online

The most challenging part of getting a good mortgage deal is to find out a reliable broker. The task becomes more difficult when you search for a broker online. There are so many frauds in the industry that it is really difficult to trust an agent. Though a large number of them have been weeded out of the industry during the last economic meltdown, it is still wise to practice caution. There are some simple ways to scan the credibility of a broker and deal with the right person. Ask a broker the following 5 questions and you can decide whether the person is worth relying or not.

Can you help me in getting the best interest mortgage loan?

It is important to go with the interest rate that you can afford comfortably. The broker gets commission once you sign up a deal. So, it is not in the best interest of the person to get you the lowest possible rate. That is why you should prioritize the broker who thinks what works in his clients’ favor. The broker must be patient to provide you with the latest updates on mortgage rate that keeps on changing frequently.

How much closing cost will I need to pay?

Lenders and other parties involved in mortgage loan transaction spin quite a goodly sum on processing fees. Your broker is required to inform you about the estimated fee before any deal is finalized. Ask the broker to give every piece of information in writing.

Can you get me any lock on mortgage interest rate?

Mortgage interest rate is very much volatile and keeps on sliding up and down almost day in and day out. You may want to place a lock on the rate if it shows any continuous upward rise. Locking may increase the interest rate by one percent or may keep it fixed. Also inquire if you have to pay any additional fees for locking and the time duration of ‘lock on mortgage’ rate.

How much is the prepayment penalty for mortgage loan?

Prepayment penalty can go up to 1% of what you have received as loan. It will be roughly $3,000 in figure on an average home. You may also pay six months’ interest as prepayment penalty. However, this will be much less than the amount what you pay as per current low rate. It is sometimes possible to avail the lowest mortgage rate if you agree to stringent prepayment penalties. Find out which penalty criteria suits your case and try to optimize benefits on it.

Will the down payment have any impact on the cost of total mortgage?

Your broker may ask you to make down payment 3-5% of mortgage loan. However, paying so little will cost you a heavy sum for bearing the consequent expenses. Majority of the lenders will require you to pay less than 20 percent as down payment for availing private mortgage insurance. It is better if you consider both the plus and minus points of making larger and smaller down payment.

Is Buy-To-Let A Good Bet In 2013

Demand for rental properties is set to continue to increase in 2013 with four in 10 landlords predicting rises, according to a recent poll.  The LSL Property Services landlord survey from December shows that for every investor who expects to lower rents, 39 expect to increase them.

Of the 1,223 landlords polled for the survey, 10 per cent are anticipating greater than 5 per cent rises.

It follows last month’s report by the Association of Residential Letting Agents predicting demand to significantly outstrip supply for landlords in 2013.

As house prices have rocketed in the last decade home ownership has become more difficult for young people to achieve.

Statistics from the Council of Mortgage Lenders show the average age of a first-time buyer standing at 33 and rising. Deposits are tough to raise, mortgages are hard to obtain and houses are expensive. Many are being forced into renting, particularly in areas where homes are expensive such as London and the south-east. Tough mortgage conditions are dovetailing with demographic trends to boost the UK buy-to-let mortgages.

Whether it is the greater desire for flexibility young people, immigrants needing housing or a growing student population renting has been the answer over the last decade.

These trends create a huge opportunity for private landlords and boosted demand form tenants, pushing up rents and creating huge opportunities for good returns.

How do I become a landlord?

The potential profit to be made by entering the UK buy-to-let market in 2013 is clear but how do you get started?

Aspiring landlords will need to choose a property that can be rented with a specific target in mind. It could be students, young people or even families. The next step is to get your hands on a buy-to-let mortgage, which operate quite differently to your normal mortgage.

Firstly, you will need to raise a deposit. The level of deposits required for buy-to-let deals has relaxed in recent years but the barrier to entry is still high. The minimum deposit will be 15% of a property’s value and such deals remain rare with most lenders requiring deposits of 25% to 40%.

It is also worth bearing in mind that the lower the deposit raised the higher the interest rate you will pay for the privilege.

Secondly, the affordability criteria is not based on your own personal salary but on the ability of the house to generate rental income. Lenders will have ways to evaluate expected rental income and this should be the basis of your application.

Which lender should I choose?

For amateur landlords with two or three properties the main players are BM Solutions, part of Lloyds Banking Group, and The Mortgage Works, part of Nationwide Building Society.

Between them these two lenders take up the lion share of buy-to-let lending in the UK. They can offer good rates but as the biggest can be more inflexible than the smaller, specialist lenders.

But in the last two years a growing number of banks and building societies have entered the market as a result of growing tenant demand.

Banks such as Santander  and Barclays are making the market more competitive and pushing down rates along with prominent building societies such as Skipton, Yorkshire and Coventry.

Amateur landlords now have a wide choice of lenders to choose from and a good mortgage broker can compare the costs and criteria across the market.

There are also specialist lenders such as Paragon Mortgages who cater for professional landlords with a number of properties. Paragon will only deal with professionals and not the amateur landlord with one or two properties to rent.

Is it worth it? 

Getting a buy-to-let mortgage is much easier than it was a few years ago with a growing number of lenders offering 15% deposits. More lenders is also creating less stringent criteria and better rates.

As a landlord there is always a risk of void periods, when no rent is received, but the mortgage payments still need to be met. There are also maintenance costs and potential drops in property prices.

A buy-to-let mortgage is an investment product and should be seen in the context of the associated risks. But the UK property market has weathered the storm well on property prices and rental yields are strong making buy-to-let a potentially good bet for 2013.

Live Mortgage Free by Letting Your House to a Lodger

The rent amount is on a steady rise which means that the homebuyers can easily manage their mortgages by renting a room and invest the income for buying a home. Depending on the regions where they are renting, they can make a saving of tidy figure. The homeowners in the area of low house prices stand a good chance of earning a surplus over their mortgage expenses as compared to those living in the south.

The government-supported rent scheme has paved way for attractive earning as much as £4,250 a year or £354 a month tax-free. According to Santander – one of the big mortgage lenders in Britain – the number of people taking in lodger for extra income has already crossed 1 million and it is going to rise in coming days.

SpareRoom.co.uk website, one of the most popular flat and house share websites, has revealed the fact that there are many cities in UK where the homeowners can live mortgage free through spare room renting. The site did a comprehensive calculation by taking into consideration of several realities such as the average rent of a two-bedroom house in the UK cities and the annual for the fixed rate two year mortgage loan (which is 80pc LTV or loan to value at present).

The homeowners living in Blackpool and Manchester can save up to £800 over their mortgage expenses whereas the figure drops down to a little over £200 a month in Birmingham. In the Belfast and Glasgow, the householders also enjoy a good figure of surplus. However, London makes a distinct absence in the list. It is because the UK capital is counted among the cities where living as well as housing cost is very much excessive. The two-bedroom living accommodation in London comes at £350,000 with annual mortgage cost of £12,040 whereas the average rent procured from a lodger is only £8,268.

Half of the UK towns and cities where living mortgage free is not a distant dream for the house owners are seated on the north sides and a third is located in the Midlands. The noteworthy fact is that no town from the South makes an appearance in the list. It makes sense to take in the lodgers where the house price is extremely higher and the demand for the rented apartments has also gone up to a high. The house owners definitely want to make money out of renting with the least of inconvenience and this can be done by letting house to the commuters.

So if you want to live with surplus during the mortgage term, renting your house is the best option to go for. Nothing can make you happier than paying the mortgage out of your lodger’s pocket.

Benefits of Re-mortgaging Your Home

Your mortgage is more than likely to be the biggest single expense in your household budget and one that has to be paid for anywhere up to 25 years, sometimes more.

Why remortgage?

With the pressure on household finances continuing it’s important to make sure that you’re getting the best possible deal on your mortgage. You could benefit from shaving significant amounts off your monthly payments by remortgaging.

The first thing you need to do is to review your current product. Check the rate and the term of any deal you are on. You also need to make sure there are no exit penalties that can be applied by the lender if you try to break out of the mortgage earlier than the terms allow.

Even if there are exit penalties to pay, it may be still be cheaper to move but you will need to calculate this very carefully to avoid being stung by high charges. You also need to check the fee on any new mortgage as some can be very hefty.

With interest rates historically low, mortgage rates are also very competitive so it’s potentially a good time to switch. However the best deals are reserved for people who have plenty of equity in their home and so present a lower risk to lenders.

Other benefits of remortgaging

Some people will want to remortgage so they can raise money. This can be more cost effective than borrowing any other way, for example using a loan or on a credit card, but you must make sure you can keep up the payments.

If you get a new, lower rate it may be possible to borrow extra money and still pay not pay much more than you do at the moment, but remember that your home could be at risk if you cannot keep up the mortgage payments.

Remortgaging may also allow you to extend the term of your mortgage for longer which has the advantage of making monthly payments cheaper, but will cost you more in the long run.

If you do get into financial difficulties then IVAs managed by Churchwood are a good way to manage your debt. An IVA allows you to pay off your debts with an affordable monthly payment. In addition an IVA comes with a guarantee that remaining unsecured debts will be written off after an agreed time   normally 60 months.

What kind of mortgage should I get?

Anyone remortgaging will need to compare all the available mortgage products from different lenders. You will also need to decide if you want to lock into a fixed rate deal and for how long. Another option is to consider a discounted or tracker product, where you would benefit if the Bank of England Base Rate dropped even further, but pay more if it started to rise.

With some experts predicting that rates will stay low for many years to come, a lifetime tracker may be a good deal in the longer term.

Whatever the reason for a possible mortgage switch, it’s a fast moving market with new mortgages coming into play all the time and others being removed quickly, so you will need to act fast if you see a competitive product that’s right for you.